Asia Cuts Losses to End Mixed After Cyprus Scare
Asian markets eased off their lows to close mixed on Tuesday after comments from the Eurogroup president about using the Cypriot "bail-in" as a template for future deals spooked investors while Shanghai shares led losses over liquidity fears.
Amid gainers, Seoul's Kospi bucked the trend to rise above the 1,980 mark on hopes of higher economic growth while Hong Kong stocks reversed earlier losses to end up 0.3 percent.
Eurogroup chief Jeroen Dijsselbloem back-tracked on his earlier comments that Cyprus could be used as the model for future bailouts. The idea of Cyprus as a template caused panic as it signaled that investors with more than 100,000 euros could take a hit when governments ask for a bailout.
Investors are now asking themselves how they should be assessing the negative spillover effect on various asset classes.
"You need to look at credit default swaps of Italian and Spanish banks against German banks because this is becoming a credit story, not a matter of whether they can actually facilitate and fund government deficits," said Steen Jakobsen, chief economist at Saxo Bank on "Capital Connection."
Kuroda in Focus
The newly installed central bank chief Haruhiko Kuroda told parliament on Tuesday that he advocated the purchase of longer-term government bonds but his comments failed to pull the Nikkei out of negative territory.
Kuroda further stated he had a two-year time frame in mind for achieving the government's 2 percent inflation target, which helped contain the Nikkei's losses.
The yen did weaken against the dollar in reaction to his statements, moving above the 94 handle. The yen has been appreciating ever since hitting a three-and-a-half-year low of 96.7 per dollar earlier this month.
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"What we got from Kuroda last week really didn't fill me with optimism that this is 'Kuroda the Bold,' I think it's 'Kuroda the Cautious' that we're going to see in coming weeks," said Robert Rennie, global head of forex strategy at Westpac Bank.
Shanghai Down 1.2%
Mainland shares fell below the 2,300 mark to under perform the region after reports surfaced that China's central bank will conduct another liquidity draining operation on Tuesday, leading to a sell-off in financials.
Both China Minsheng Bank and Haitong Securities tumbled over 4 percent. China's largest listed brokerage, CITIC Securities, fell 2.7 percent.
A report in the official China Securities Journal outlining fresh restrictions for Chinese banks in loans to the property sector also hurt sentiment. The index managed to end above a one-week low hit earlier in the session at 2,281 points.
Meanwhile, investors in Hong Kong digested an onslaught of blue chip earnings.
Both China's top footwear retailer, Belle International, and sportswear retailer Li & Fung lost 1 percent after posting weak 2012 net profit results.
Banks are in focus with two of China's 'Big 4' lenders reporting Tuesday, Bank of China and Agricultural Bank of China. Both stocks were lower by 0.3 and 0.7 percent ahead of results.
Seoul's benchmark crossed the 1,980 mark as new measures announced to boost economic growth overshadowed pessimism over Cyprus's bailout model.
President Park Geun-hye announced a $268 million investment plan late Monday to help resolve the problem of household debt, which has been hindering economic recovery.
The Kospi remains one of the few equity markets in the region that have fallen so far this year, down 1 percent compared with the Nikkei's 20 percent gain. Investors attribute the loss to sluggish economic growth and are hoping President Park's new measures will eventually translate into a rebound for the Kospi.
Growth-sensitive cyclicals led gains with techs and autos at the forefront. Hyundai Motor rallied 2.3 percent while SK Hynix added 1.5 percent.
Oz Miners Weigh
Australia's benchmark closed below the 5,000 mark for the fifth straight session, weighed down by resource stocks after metal prices fell overnight.
Atlas Iron and Mineral Deposits Limited slumped 5.5 percent each.
"If you look at the currency at 80 cents and iron ore prices around $80 a ton, you can still get share prices on BHP and Rio at $40 and $90 in the long run," said Greg Fraser, head of research at Kimber Capital on "Cash Flow."